Treasury yields mixed as investors digest week of bond volatility

U.S. Treasury yields were mixed on Friday as Kevin Warsh took the reins at the Federal Reserve. The volatility followed a week that had earlier seen borrowing costs rise to multi-year highs in response to renewed concerns about inflation.

The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — last fell more than 2 basis points to 4.558%.

The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, traded up more than 3 basis points to 4.123%. The longer-dated 30-year Treasury bond yield fell more than 4 basis points to 5.064%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

The 30-year Treasury yield briefly climbed above 5.19% earlier this week, reaching its highest level since 2007, before easing on Thursday. 

The volatility in the bond market came as U.S. President Donald Trump swore in Kevin Warsh as chair of the Federal Reserve on Friday. So-called bond vigilantes have eyed the appointment closely, looking for signs of whether Warsh will heed Trump’s call to further cut rates despite inflationary risks.

Meanwhile, the U.S. and Iran have signaled progress in talks to end the war, but the combatants remain at loggerheads over Tehran’s enriched uranium stockpile and tolls on the strategically vital Strait of Hormuz.

U.S. Secretary of State Marco Rubio on Thursday said there were “good signs” that an agreement to end the conflict is in sight, but warned any such deal would be “unfeasible” if Iran pursues measures to permanently control shipping through the Strait of Hormuz.

“No one in the world is in favor of a tolling system. It can’t happen [and] it would be unacceptable,” Rubio told reporters in Miami, Florida.

— CNBC’s Sam Meredith and Jeff Cox also contributed to this report.